Student loans can be both a blessing and a curse depending on your circumstances following graduation. On one hand, they provide an opportunity to invest in a college education and increase your chances of finding a stable, well-paying job. On the other hand, they can leave you with a heavy burden of debt that may not be manageable.
In this article, we’ll discuss the benefits and potential disadvantages of student loan debt and help you understand
if it’s a good investment for your life or not. So, stay tuned to learn more.
The Difference between Good and Bad Debt
A good debt is borrowing money for something that will appreciate in value over time. This can include mortgages, small business loans, or other investments. In contrast, bad debt is borrowing money to pay for something that decreases in value, such as an auto loan or a credit card debt with high-interest rates.
Student Loans – A step into burning fire or soothing waters
Student loans fall in a gray area between good and bad debt. On one hand, a college degree can significantly increase your earning potential compared to those without one. According to a Student Loan Hero survey, college graduates earn more than those with less education.
However, student loan debt can also be bad as there are no guarantees of employment after graduation. With student loan debt topping $1.64 trillion and over 45 million borrowers, it can be difficult to repay this debt, especially during tough economic times.
Merits of Student Loans
Student loans provide an opportunity to invest in your education and future career. You can attend college without paying the full tuition upfront and increase your chances of finding a well-paying job. Additionally, federal student loans come with lower interest rates compared to other loan products and offer tax-deductible interest. Federal student loans also come with a variety of repayment plans, allowing you to align your loan payments with your budget.
Demerits of Student Loans
Even with a college degree, you may still face unemployment after graduation. Furthermore, entry-level workers
may not earn enough to afford their loan payments. Unaffordable student loan debt can lead to default and
damage your credit score, making it difficult for you to be approved for other types of credit. The high value of
student loan debt compared to a lower salary can also result in a distorted debt-to-income ratio, damaging your
credit even further.
Alternatives to student loan
Knowing the good and bad about student loans, you may be wondering “what’s the alternative? Well, all hope is
not lost because there are a few options you can pursue. Below are a few:
1. Scholarships
Scholarships come in different forms and are awarded by governments, individuals and Universities to help mostly
needy but brilliant students climb up the academic ladder. If you have great academic results and have volunteer
hours, you may be the ideal candidate for a full scholarship or partial scholarship.
Begin your search on the institution you wish to study in and find out if they have scholarship opportunities and
what the requirements are. You can then start the application process and hope you get picked. The internet is full
of resources for available scholarships.
2. Family and Friends
Family and friends may be willing to support your education if only they have the means and you ask. Check with
some of your relatives and friends who are employed and doing well and let them know you need help, some may
be willing to support you without requiring you to pay back, or give you soft loans with little to no interest.
Final words
Student loans can be both a good investment and a bad one, depending on your individual circumstances. While a
university degree can increase your earning potential, it does not guarantee employment. Before taking out a
student loan, it’s important to carefully consider your future job prospects, earning potential, and ability to repay
the debt. If you feel confident in your future prospects, student loans can be a great benefit. However, if you are
unsure, it may be wise to reconsider or explore alternative options.
